General Market Analysis – 05/03/25

Markets Drop on More Tariff News – Dow Down 1.5%

U.S. stock markets experienced a volatile day yesterday as tariff and counter-tariff updates hit the market. The three major indices finished in the red but pared back earlier, steeper losses. The Dow closed down 1.55%, the S&P 500 fell 1.22%, and the Nasdaq dropped a relatively modest 0.35%.

The dollar took a substantial hit, with the DXY losing 0.92% on the day, while Treasury yields pushed higher after recent losses. The 2-year yield rose 3.2 basis points to 3.982%, and the 10-year yield climbed 8.7 basis points to 4.242%.

Oil prices dropped again, with Brent hitting a six-month low—down 0.85% to $71.01—while WTI declined 0.73% to $67.86 per barrel. Gold pushed higher as the dollar weakened, gaining 0.83% on the day to close the NY session at $2,916.80.

FX Back in Focus as Markets Move Hard

The dollar suffered a significant decline in trading yesterday, with the DXY down 0.92%, mainly due to a resurgent euro, which surged nearly 1.25% after Germany announced a new €500 billion infrastructure fund.

Those viewing the dollar from a binary perspective would have seen the DXY drop nearly 2% over the last two days. However, in the current market environment, opportunities are likely emerging beyond the straightforward dollar plays that typically drive movements.

Geopolitical developments have played a major role in the sharp market moves seen overnight and in recent months. As a result, traders are finding strong opportunities in individual currencies and cross pairs more frequently than usual. Many experienced traders anticipate continued market volatility in the short term and are focusing on specific currencies—particularly the EUR, CAD, MXN, and CNY. However, traders should remain flexible, ready to pivot as market trends and news dictate.

Another Big Day Ahead for Markets Today

Financial markets are gearing up for a significant day, with a packed schedule of macroeconomic events and the potential for more geopolitical developments to impact the news cycle.

The Asian session has plenty of early action, with Australian GDP data being released alongside a scheduled speech by the Bank of Japan’s Kazuo Ueda. However, both events are likely to be overshadowed later in the session when President Trump addresses Congress.

Additionally, statements from China’s National People’s Congress (NPC) on global issues could trigger further market moves.

In the London session, early attention will be on Switzerland’s CPI data, followed by the Bank of England’s Monetary Policy Report Hearings, which will be closely watched by UK markets.

The New York session brings the first set of U.S. jobs data for the week, with the ADP Non-Farm Employment Change figures due (expected: +141K). Later, the market will focus on the Final Services PMI (expected: 49.7) and the ISM Services PMI (expected: 52.5).

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